Microeconomics

The firm Lemonita Farm is a typical producer of lemons earning normal profits in a perfectly competitive market. (3) Draw two correctly and completely labeled graphs, one for the lemon market and one for Lemonita Farm, showing: (i) the equilibrium market price for lemons, labeled Pm (ii) the equilibrium market quantity for lemons, labeled Qm (iii) the equilibrium quantity for lemons from Lemonita Farm, labeled Qf (iv) the average total cost curve for Lemonita Farm, labeled ATC (b) Several weeks of freezing weather destroy lemon trees across the region. (i) On your market graph from part (a), draw the new supply curve for lemons and label it S1. (ii) On your market graph from part (a), label the new equilibrium price as Pm and the new equilibrium quantity Qm1. (iii) Due to the supply shift, does the equilibrium quantity decrease, increase, or stay the same? Explain. (iii) Due to the supply shift, does the equilibrium quantity decrease, increase, or stay the same? Explain. (c) Lemons and sugar are used together in many recipes, including lemonade and lemon meringue pie. (i) The price of sugar drops by half. What will happen to the equilibrium price and quantity for lemons in the short run? Explain. (ii) How will the change in the price of sugar affect the revenue of Lemonita Farm? (iii) What will happen to the equilibrium price and quantity for lemons in the long run? Explain